New rule for electric car tax incentive delayed
The Joe Biden administration wants half of all new vehicles sold by 2030 to be zero-emission. It’s pouring billions into the industry to incentivize car companies to make electric vehicles and get customers to buy them.
A lot of the incentives now also involve getting those cars and their components to be made in the U.S. But those newer requirements have been contentious.
This week, the administration delayed announcing the details of a new rule requiring that a certain percentage of battery components be sourced in the U.S. or countries that have free-trade agreements with the U.S.
Tax credits for electric cars have been around for more than a decade. Those credits are designed to do a few things, said Gil Tal at the Electric Vehicle Research Center at the University of California, Davis.
“They’re incentivizing the car companies to make these cars. They help the buyer to purchase them at a little bit lower price, so they create more demand.”
And — especially since the passage of the Inflation Reduction Act — officials are pushing companies to make electric cars in the U.S.
Now, EV tax credits are only available to people who buy cars assembled here. That change is a big deal, said Morgan Bazilian at the Colorado School of Mines.
“If you drive around in the United States these days, if you’re not seeing a Tesla as an EV, you’re likely to be seeing something coming from South Korea in a Hyundai or Kia.”
Americans used to be able to get a tax credit for buying an electric Kia. Now, they can’t. “And that has been a large point of contention between the car manufacturers, but also the governments,” Bazilian said.
The now-delayed requirements around where car makers source their batteries? That’s also a big deal, he said, because most of the minerals to make those batteries come from China. And making a switch quickly is not easy.
“There’s clearly a negotiation happening to buy time,” said Adie Tomer at the Brookings Institution. And foreign carmakers don’t want to lose out.
“The American auto market is by far one of the largest in the world,” he said. “And with the expected explosion in EV adoption going forward, it was really important for automakers across the world to see that they would continue to be a part of the American auto marketplace.”
In recent months, a number of companies have announced plans for new car plants and battery plants in the U.S. — and he expects more to come.
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